Don’t be one of those people who comes home to a nonexistent credit file
Have you heard cautionary tales about people who flew off to live abroad only to return to find their U.S. credit score gone?
That can happen, but taking the right steps can help you keep your credit profile alive and well while you’re away.
Credit reporting and scoring are country specific, and your U.S. credit history is tied to your Social Security number, says Rondi Lambeth, a FICO certified credit pro and host of the radio and TV show “Your Credit Matters.”
And if you allow more than six months to go by without any credit or loan issuers reporting payment activity to the credit bureaus, you risk losing your credit score.
|HOW TO KEEP YOUR U.S. CREDIT PROFILE ACTIVE WHEN LIVING OVERSEAS|
To keep your credit active, it can help to keep and use at least one credit card during your travels. Take J.R. Duren, a personal finance writer for HighYa.com, who moved to Germany and Spain for three years beginning in 2013. During that time, he says he and his wife maintained U.S. credit scores in the high 700s.The couple first spent time in the Black Forest region training at a community arts center, then moved to Barcelona, where they had a baby and pursued a dream of hosting a series of house concerts. During their adventure abroad, they faithfully charged expenses of $1,800 a month on a Hyatt Visa hotel rewards card they had opened before they left the United States. They always made their payments on time and paid in full almost every month, which was a smart strategy.
To keep your credit in great shape from afar, it’s best to use your cards every month, Lambeth says.
“If you’re not using your credit, you lose it,” he says.
1. Make sure you have travel-ready cards.
You can plan to sell your car and house and pay off outstanding loans before you leave the country, just don’t leave your credit cards behind.
“You can have great credit without a mortgage or auto loan, but you can’t have great credit without credit cards,” Lambeth says.
As a first step, check your wallet to make sure it includes several cards that will work well abroad for regular purchases.
Think you might need a new card or two? “It’s probably best to apply before you go,” says Nessa Feddis, a senior vice president with the American Bankers Association, adding that it may be much harder to get a U.S. credit card, especially if you lack a permanent U.S. address, once you’ve left the country.
For everyday use abroad, it’s important to have at least one card that doesn’t charge a foreign transaction fee, which typically runs about 3 percent for every purchase made outside the U.S., says Brian Davis, director of education for the rental investment site SparkRental.com, who lives in the United Arab Emirates.
Before Davis and his wife moved to Abu Dhabi for her job as a school counselor, the couple got a Bank of America travel rewards card that fit that bill and saves them a lot of money. When living abroad for years, as opposed to just taking a vacation for a few weeks, foreign transaction fees can really add up and may discourage you from using your card, Davis says.
If you have cards you don’t anticipate using for regular spending while abroad, keep the accounts open anyway for the benefit to your credit, recommends credit expert John Ulzheimer, formerly of FICO and Equifax.
2. Prep your credit for an international move.
Once you have the credit cards you plan to use during your time away, you’ll have to take a few additional steps before you leave.
Just as if you were taking a vacation, call your credit card issuers and let them know that you’ll be moving abroad. Most issuers will not have a problem with a U.S. cardholder living in a foreign country and will allow you to keep your cards, Feddis says.
If you fail to notify your issuer of your plans, especially if you don’t normally travel a lot, your cards could get shut down temporarily for suspected fraud, Ulzheimer says.
Next, consider what physical address to put on file with the card issuer. One option is to use the permanent address of a parent or other trusted family member. Another is to put your foreign address on file. That’s what Duren did, and that decision came in handy when he lost his card while shopping in downtown Barcelona and the issuer immediately sent a replacement card to the Spanish address on file. “It was amazing how quickly we got a new card,” he says.
However, Lambeth says if you list a foreign address with your creditors, that change will get reported to the credit bureaus and could put you in a higher risk category and may cause a slight ding your FICO score. That’s because living in a foreign country means you likely run a bigger chance of paying late or missing a payment, he says.
Lambeth recommends using a mail service that provides you with a U.S. mailing address while you’re gone. If you choose, you can have certain pieces of mail scanned and emailed to you or physically forwarded.
That’s what Davis does, and he says the service saved him from getting a black mark on his credit after he had signed up for prepaid cellphone service while visiting family in the United States and kept getting charged by mistake after his return to Abu Dhabi. The mail service alerted him to the unexpected bills.
“I had to call them and tell them to stop billing me,” he says. “Otherwise it could have been sent to collections.”
3. Keep tabs on your credit.
Once you’ve made your big move, it’s important to monitor your U.S. credit reports and scores on a more frequent basis to spot any fraudulent use.
While designating one card as your primary piece of plastic to use abroad, keep any other cards open and active by putting a small recurring monthly charge, preferably one from a U.S.-based service, on each one. For example, you could pay for your mail forwarding service with one card and the web hosting for your travel blog with another.
Use automatic payments to stay on top of bills, Lambeth says. For the cards you use for small recurring charges, set up automatic monthly payments of the full balance through the card issuer’s online portal, he says. For the cards you use for bigger expenses, set up automatic minimum payments to avoid accidental late fees. Then set a calendar alert to remind you to log into your account and manually pay the rest of the bill.
Automated payments come in handy if you’re in a location with iffy internet access that could prevent you from logging in and making a payment manually, says Jonathan Look, a writer and photographer at LifePart2.com, who retired early and has kept a score in the 800s while living in Cambodia, Laos, Mexico and Thailand.
Duren agrees, adding that it’s hard not to get distracted while creating a life in a new place. “You have so much going on trying to integrate yourself into a new culture that it’s easy to forget about a payment on a credit card you used one time,” he says.
While living abroad, it may also be a good idea to sign up and pay for a quality credit monitoring service so you can track your credit reports and score and get immediate notification that can alert you to identity theft before it causes much damage, Lambeth says. Busy people living abroad can easily miss red flags, such as small charges on their credit cards or a bill that suddenly stops arriving, he adds.
Duren relied on the free credit reports at AnnualCreditReport.com, which worked well for him. You can check a report from each major bureau every four months to monitor your credit throughout the year. You can also check your credit report from TransUnion for free anytime at CreditCards.com.
“I made sure there’d be no surprises when we got back home,” he says.